Inflation is everywhere right now. You feel it at the grocery store, at the gas station, and even in your monthly mortgage payment. Rising inflation raises the cost of goods. It also affects the cost of borrowing money, which has a direct impact on homeowners.

When economic factors, such as high costs, drive up interest rates, current homeowners may see changes if they are renewing or refinancing their mortgages. Still, how does inflation work its way into your housing costs? And how can you prepare for it?

In this blog, we will explain how inflation influences the housing industry. This includes mortgage payment, what to expect, and how a broker can help you stay ahead.

What is inflation?

Inflation means your money buys less over time. It happens when prices for goods and services go up. A cup of coffee that cost $2 last year might cost $2.20 today. This is inflation at work.

One way to track the inflation rate is the consumer price index (CPI). This tool keeps tabs on changes in economic factors like supply and demand, wages, and production costs.

The inflation rate tells us how fast costs rise. An inflation calculator can also be used to show how it impacts your money.

What is causing inflation in Canada?

According to the CPI, Canada’s inflation rate averaged 2.39% in 2024, and the forecast for 2025 suggests a drop to 2.15%.

The cause of the rise, historically, is attributed to:

  • Higher transportation and food costs. 
  • The end of tax breaks, such as the Goods and Services Tax/Harmonized Sales Tax.
  • Global supply chain delays.

All of these drive up prices, not just at the store, but also in real estate. As costs climb, so do mortgage fees. This also affects the mortgage payment.

Tools like an inflation calculator can be helpful. They can be used to estimate mortgage payment changes early.

How Inflation Affects Mortgage Payments

When cost rises, so do mortgage interest rates. Lenders raise the mortgage rates against the shrinking value of money over time. This directly affects your mortgage payment.

Even a small uptick in mortgage rates, such as from 5% to 6%, can mean hundreds more each month. For example:

  • A $500,000 mortgage at 5% has a monthly payment of about $2,900.
  • At 6%, it jumps to over $3,200. That is a big difference. Use a mortgage calculator to test different scenarios.

Also, closing fees for a mortgage tend to rise with inflation. Expenses like legal fees and service charges get pricier. Always estimate mortgage payments based on the rate of inflation.

Fixed and Variable Mortgage Rates Are Impacted

To fight the rising inflation, the Bank of Canada sometimes raises its benchmark rates. This pushes up mortgage interest rates across the board. When the inflation rate goes up, so do the mortgage and monthly bills.

Variable-rate mortgages feel the change faster than fixed ones. Fixed rates stay stable, but they start higher. Either way, the impact affects both.

We Can Help You Manage Mortgage Inflation

Inflation should not control your mortgage. With the right insight and guidance, you can stay ahead of rising costs and protect your budget.

At Northwood Mortgage, we understand how inflation works in Canada. This is why our expert mortgage brokers help you understand how inflation affects your loan and compare closing fees.

We also provide estimate mortgage payment options that fit your needs. You deserve clarity today! You can call us at 888-495-4825 or contact us online to get a clear picture of your future mortgage payment.